From: cirfo@kdpyield.com
Sent: Wednesday, December 03, 2003 1:54 PM
To: rule-comments@sec.gov
Subject: Re: File No. S7-19-03
Secretary Jonathan Katz
Securities and Exchange Commission Re: File No. S7-19-03
450 Fifth St., N.W.
Washington, DC 20549
Dear Secretary Katz,
Re: File No. S7-19-03
I am a CFA and have been involved in the investment industry
since the late 1070s, employed as both a buy and sell side
equity and/or corporate bond analyst. I have followed the U.S.
Securities and Exchange Commission's actions on the recent
corporate misdeads, and fully support corporate accountability
reform. I am writing to offer supporting comments on SEC
proposal S7-19-03 regarding security holder director
nominations, and to make a further suggestion.
1. Some corporate boards award outrageous pay and retirement
perks to corporate executives, in the belief that these will
ensure superior performance, and generate relations between the
board and executives. These same boards are sometimes unwilling,
or unable, to challenge CEOs with the tough questions their
duties require. (CEOs control the flow of information.) This
kind of board behavior can allow self-dealing executives to
destroy corporations, leaving shareholders, workers and
communities to suffer the consequences.
By giving shareholders a voice in picking corporate directors,
the reforms put forward by the SEC have the potential to put an
end to CEO's who in effect answer to no one. An excellant book,
Why Smart Executives Fail, by a Tuck B-school professor speaks
on this phenomena. However, as proposed, the rules contain
certain barriers, including high ownership thresholds and a
cumbersome two-year process. During two years, much shareholder
and economic damage can be done. In addition, they are difficult
for investors to actually use. I urge the SEC to reject
constraining barriers and to adopt final rules that truly will
give shareholders a voice in picking directors. Proxy battles
are costly, with the side having the greatest resources winning.
One only has to look at the El Paso Corp. proxy battle which was
won by the incumbents who spent over $10MM to retain their board
seats. The opposition slate spent over $6MM, also not a piddling
amount.
2. I would like to suggest that the SEC implement rules which
limit the length of time an individual director can serve on a
particular company's board of directors. Directors who have
served on a board for 10,15, even 20 years are no longer
independent, and can become too inert to ask difficult
questions. I fully realize the value of experience, but there is
also the problem of staleness and inertia.
Thank you for your efforts to protect shareholders.
Sincerely,
Hope Crifo, CFA
KDP Investment Advisors
24 Elm Street
Montpelier, Vermont 05602